Ukraine’s central bank notes high demand for UAH-denominated bonds

Demand for UAH denominated OVGZ/OVDP domestic bonds has been growing among non-residents since last autumn, the NBU has said. As a result, the foreign investors’ portfolio of UAH denominated notes grew from zero last August to almost UAH14bn (USD540m) by early April, said the NBU, explaining this with growing interest rates and favorable taxation changes.

If the share of foreign investors in the domestic security market grows significantly, Ukraine may become more vulnerable to external shocks, but currently the NBU estimates risks as low, as the share of foreign investment in the total volume of UAH denominated OVDPs in circulation equals only some 2%, corresponding to only 3% of the NBU’s international reserves. Also, the government has limited placements of three-month and six-month notes at UAH500m, stimulating demand for longer bonds, said the NBU.

Over Jan 1 – Apr 17, the FinMin issued domestic bonds for UAH26.37bn, EUR123m, and USD669m, according to our calculations based on data from the central bank.

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